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Nikkei Markets

Hong Kong stocks fall into bear market on trade worries

Smartphone component suppliers extend losses as trade war intensifies

HONG KONG (Nikkei Markets) -- Hong Kong stocks fell for a fifth straight day on Tuesday, dragging the benchmark equity index into a technical bear market, as worries grew that the full impact from an intensifying trade war between the U.S. and China had yet to be felt.

The Hang Seng Index lost 0.7% to 26,422.55, a level that is more than 20% below the all-time high of 33,154.12 it hit in January. Although the gauge jumped 9.9% that month, its best in nearly two years, it has dropped in six of the seven full months that have gone by since then. The Hang Seng Index has lost 5.3% so far in September.

Casino operators tumbled on Tuesday, with Galaxy Entertainment Group sliding 5.8% and Sands China losing 3.7%. Analysts at Bernstein wrote in a note their channel checks indicated gross gaming revenue in for early September was below their expectation.

Tencent Holdings, one of the heaviest weighted stocks on the Hang Seng Index, fell 1.8%. The social-media and gaming company on Monday said it will be shutting down its Everyday Texas Hold'Em poker game amid tighter regulations for online games.

Rising trade tensions between the world's two largest economies, increasing interest rates in the U.S. and the accompanying fear of outflows from emerging markets, and a steadily weakening yuan have all contributed to the turnaround. Washington and Beijing have already imposed two rounds of tariffs on goods they import from one another, and U.S. President Donald Trump has signaled America's readiness to levy duties on a further $200 billion of Chinese exports. He warned last week that an additional $267 billion of Chinese goods could also be subjected to tariffs.

"Recent declines show the market lacks confidence" as the U.S.-China trade war and the yuan's depreciation cloud sentiment, said Eric Yuen, chief research analyst at Mason Securities. "The Hang Seng Index is likely to continue its soft declines as long as these two factors show no improvement."

It is hard to say the worst is over as "the tariffs will in the long run force more companies to relocate production capacity away from China, hurting the Chinese economy" and jobs, Yuen said.

In the mainland, the Shanghai Composite Index gave up 0.2%, while the yuan traded onshore slipped 0.1% against the U.S. dollar to 6.8643, on course for a fourth day lower.

In Hong Kong, Apple supplier AAC Technologies Holdings sank 3%, its lowest close since January 2017. U.S. President Donald Trump on Saturday tweeted that the iPhone maker should make its products in the U.S. if it wanted to avoid tariffs on Chinese imports.

China Southern Airlines declined 3% amid broad market losses in Hong Kong. The airline on Monday said it carried 14.4% more passengers in August than it did in the same month a year ago.

Greenland Hong Kong Holdings slid 2.8%, although the developer on Monday reported an 88% jump in contracted sales for August.

CNT Group jumped 16.9% as trading in the stock resumed after a halt on Monday. The paint products maker said a unit will sell certain property assets in Hong Kong to Jetco (H.K.) for HK$900 million, and at the same time buy a hotel asset from Jetco for HK$530 million.

Footwear and handbags retailer Le Saunda Holdings declined 2.8% after saying it expects to record a net loss for half-year ended Aug. 31 compared with a profit a year earlier.

China Huarong Asset Management slid 2.1% to a record low, after the state-owned company said it has decided to withdraw its application for an A-share offering.

-- Amy Lam

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